Inflation could be rising but there isn’t much risk of it getting out of control, said Minneapolis Federal Reserve President Neel Kashkari on Friday.
“I believe we can get back to 2% inflation,” Kashkari said during a town hall meeting with the Minnesota Hospital Association.
“And if inflation goes a little bit above 2% that’s absolutely fine,” he added.
But a general outbreak of inflation is unlikely, Kashkari said.
“I don’t see much risk of inflation shooting way above 2%,” he said.
The Minnesota Fed president said that if inflation does surprise to the upside, the central bank has the tools to deal with it.
During his talk, Kashkari said there has been some bad news about the pandemic and the rollout of the COVID-19 vaccine.
The vaccine rollout has been much slower than expected and people’s willingness to take it seems to be lower than expected, he said.
In addition, estimates of the threshold for herd immunity have been revised given some of the mutations of the virus.
As a result, Kashkari said he doubted that he would bring back all of the employees at his regional Fed building – with no masks and no social distancing – this year.
“We can see the light at the end of the tunnel…but it’s a long tunnel,” Kashkari said.
Economists are penciling in a strong second half of 2021 under the assumption that the vaccines would allow the economy to return to resembling pre-pandemic norms.
Stocks were lower on Friday after a weak retail sales report for December. The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -1.50% was down 125 points in early afternoon trading.